Royal & Sun Reports Losses Decreasing

Royal & Sun Reports Losses Decreasing

NU Online News Service, Nov. 20, 4:21 p.m. EST?Royal & SunAlliance Insurance Group plc said its pre-tax net loss for the first nine months of 2003 narrowed to ?146 million ($242.36 million), from a ?156 million ($258.96 million) loss during the corresponding period one year ago.

At the group operating level, Royal & Sun, the United Kingdom's second-biggest property-casualty insurer, said it had an operating loss of ?212 million ($351.92 million) for the first three quarters of 2003, hurt by a ?500 million ($830 million) increase in reserves the insurer took to pay claims and fund new businesses. In contrast, the company had group operating profit of ?180 million ($298.8 million) during the first nine months of 2002.

(Exchange rates are calculated at $1.66 to the ?1, for R&SA's rate at Sept. 30.)

Announcing its financial results, Royal & Sun said "good progress" is being made regarding its U.S. restructuring effort and that the group's operational results have been good "everywhere except the U.S."

Royal & Sun's U.K. underwriting profit for the first three quarters of 2003 was ?40 million ($66.4 million), an improvement of ?104 million ($172.64 million) from last year. The combined ratio for U.K. operations for the nine-month period was 98 percent.

"But the U.S. results, as expected, were poor," said Andy Haste, the group chief executive at Royal & Sun. He said that, in the overall ?500 million ($830 million) of claims strengthening during the third quarter, ?458 million ($760 million) was booked in the United States, mainly for workers' compensation and general liability.

"Performance in both lines was poor," Mr. Haste acknowledged, "despite price increase actions." And in personal lines, the homeowners result was hurt by hurricane Isabel, which cost ?10 million ($16.6 million).

The group, which is lowering its exposure in the United States, had put in place "a transitional plan" to manage the restructuring of its U.S. operation, Mr. Haste noted, which included a new management team to oversee the restructuring implementation.

Last June, Royal & Sun Alliance said it was selling off two pieces of its overseas subsidiaries, the U.S.-based Royal Specialty Underwriting and its Puerto Rican insurance unit. And last September, the company said it was selling off substantial U.S. renewal rights to Hartford, Conn.-based Travelers Property Casualty Corp for a minimum of $25 million.

The sale of these renewal rights, announced Sept. 4, involved Charlotte, N.C.-based Royal & SunAlliance USA's commercial lines national accounts, middle market and marine businesses, and standard and preferred personal lines businesses.

The Travelers deal began to take effect in October, said Mr. Haste, and some 25 percent of the book has already transferred or lapsed. "Progress continues on shaping the future for those parts of the U.S. operation that were not included in the Travelers deal," Mr. Haste said.

"We've moved forward but still have work to do," he said. "2004 will be a transitional year as the effects of the actions we're taking work through the remaining U.S. book."